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Aerospace and defence companies tipped to resume growth

Travel demand, new technologies, and security threats are fuelling increases in aircraft production, defence budgets, and the global supply chain, according to Deloitte study.

The global aerospace and defence (A&D) industry is expected to return to growth in 2016 with total sector revenues estimated to grow in the region of 3%, according to the Deloitte Global Consumer & Industrial Products Industry group's 2016 Global aerospace and defence sector outlook.

According to the firm, this positive signal follows years of declining revenue growth of 3.2% in 2013, 1.9% growth in 2014, and an expected decline of -0.5% in 2015, as found by Deloitte Global in its 2015 Global aerospace and defence sector financial performance study.

Over the past three years, global A&D industry revenue was largely impacted by decreased revenues in the US defence subsector.

The return to growth in 2016 is expected to be fuelled by increases in the US defence budget, a resurgence of global security threats, and growth in defence budgets of key nations around the world.

In addition, relatively stable growth in global gross domestic product (GDP), lower crude oil and other commodity prices, and continued increases in passenger travel demand are contributing to expected growth in production rates for next-generation commercial aircraft.

Deloitte Global Leader, Aerospace and Defence Segment, Tom Captain commented: "Defence budgets in the US; UK; France; Japan; several Middle Eastern countries, and other nations are increasing at a time when national security threats are being heightened.

"Global revenues in the defence subsector are expected to return to growth in 2016, as governments equip their armed forces with modern defence weapons platforms and next-generation technologies, including cyber; intelligence gathering; defence electronics, and precision strike capabilities."

The study projects that the commercial aerospace subsector will continue its decade-long trend of above-average growth rates, driven by growth in passenger travel demand and an accelerated equipment replacement cycle.

Captain added: "Strong increases year-over-year of global revenue passenger kilometres are leading to an unprecedented level of aircraft production rates, which in 2015 were about twice the levels experienced 10 years ago."